Thursday, September 26, 2013

Martin A. WeissSpecialist in International Trade and Finance This report focuses on remittances, transfers of money and capital sent by
migrants and foreign immigrant communities to their home country. At over
$400 billion globally in 2012, up from $75 billion in 1990, remittances
are the second largest resource flow to developing countries and are expected
to exceed $500 billion by 2015. The United States is the largest destination
for international migrants and by far the largest source of global
remittances. The World Bank records $51.6 billion in official remittance
outflows from the United States in 2011. As the market for remittances has
ballooned, banks, traditional money transfer companies, and entrepreneurs
have responded to increased demand by increasing the amount of remittance channels
available to migrants, including mobile, Internet, and card-based options.

The dramatic rise in the importance of remittances to global capital flows has
led Congress and other policymakers to take a greater interest in these
flows. Key issues for Congress include:

Regulation of Remittances. Members may want to review the regulatory
landscape for remittance providers. Effective and proportional regulation
of remittances reduces corruption, enhances transparency, and facilitates
a more robust business environment. At the same time, additional
regulatory requirements, such as recent consumer protection requirements
included in the Dodd-Frank Wall Street Consumer Protection Act, may
raise concerns about the compliance costs for remittance providers and
consumers.

Congress may also want to consider whether current federal and state regulation
are appropriate for new and emerging payments systems such as mobile and
card options, which are starting to capture part of the remittance market.
Members may also want to review recent efforts to improve foreign
regulatory and supervisory mechanisms. Remittances are often sent to recipients
in developing countries with weak regulatory systems, increasing the risk
of money laundering and possible financing of terrorism.

Impact on U.S. Development Policy. Remittances represent a substantial
percentage of gross domestic product (GDP) in several developing
countries. Whether remittances can be leveraged to support U.S. foreign
development policy is another issue of concern to some Members of Congress.
Some analysts argue that since remittances are comprised of private transfers
between family members and friends, U.S. efforts should be directed to
reducing the transaction costs involved in remittance transactions. Others
note the potential beneficial development aspects of remittances,
including promoting investment and access to financial services, and
encouraging government programs to help stimulate these positive effects.

Remittances and U.S. Immigration Policy. Members may want to consider the
interplay of U.S. remittance policy and U.S. immigration policy. A major
goal of U.S. policy on remittances is increasing the attractiveness of
regulated remittance systems to potential remittance customers, without
regard to their legal status. Thus, U.S. Treasury officials allow remittance
providers to accept certain foreign-issued means of identification to meet
their customer identification requirements. Some Members argue that
policies like these may undermine U.S. immigration laws and advocate
restricting remittances to those with legal status under U.S. immigration laws. Others
argue that more restrictive identification measures would only push remittance
flows toward high-risk, unregulated and underground channels.

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